Today’s Policy Exchange report advocating the sale of social housing in valuable areas so that more homes can be built in poorer areas is a boring old retread but of course got lots of coverage.

‘Blindingly obvious’ said Grant Shapps ominously.

The BBC focused on Notting Hill and its wonderfully mixed community – so mixed, open and tolerant they even allow David Cameron to live there. The founders of Notting Hill Housing Trust bought properties in the area in the 1960s to protect poor people from rapacious landlords. As the property grew massively in value the balance sheet of the organisation strengthened and became the foundation for hundreds of millions of pounds of prudential borrowing for more social homes elsewhere. The same applies to all the other social landlords who operate in ‘rich’ areas. It is simply not necessary to sell the homes to use their value to create more homes elsewhere, as they have proved.

All the same promises have been heard before. Thatcher and Heseltine promised lots of new homes from right to buy proceeds, but the sold homes were never replaced and most of the money disappeared into the large pot called Treasury. Now Cameron and Shapps promise ‘one for one’ replacement for homes sold under their new RTB scheme, but the arithmetic makes this highly unlikely – and in any case will not be ‘like for like’ as they will sell off social rented homes and replace them with unaffordable ‘affordable rent’ properties.

And of course it is simply wrong to believe that the only way to fund new social housing is to sell off existing. New investment makes sense in itself. It passes the value test – creating an asset that will make will make a profit in its lifetime, especially as the cost of borrowing to build is currently very cheap. New housebuilding is the best way of encouraging growth – it is economically efficient because it does not suck in imports, exploits unused economic capacity, and, taking account of the multiplier effect, pays for itself in raised taxes and reduced benefits. Selling to pay for new investment is a red herring.

Despite all that is said about their richness, boroughs like Westminster contain areas of huge deprivation. The reality of the social tenant is Church Street not Knightsbridge, Dalgarno not Chelsea. There are reasons why much of central London remains Labour. But it really gets up the noses of Tories to have Labour MPs sitting in north Westminster, Hammersmith, and Islington. That’s when their Shirley Porter instincts kick in and social cleansing for political purposes begins to drive the policy agenda.

Policy Exchange say their policy would apply across the country but it is interesting that their rep on the Radio 4 Today programme this morning talked about Mayfair and areas like that. Mixed communities is a difficult concept to get your head around in central London. It may not be the common perception, but central London is still diverse – working class and middle income communities have survived gentrification, often because of social housing. But their man did not have a clue about towns and cities around the country and the impact their plan would have. In most places their policy would lead directly to ghettoisation and the poorest people living in the poorest places – an outcome we have struggled mightily to avoid over the last 30 years.

Shapps and pals have been cautious about attacking the rights of existing social renters, focusing on the easier task of stripping away rights from new tenants and forcing them to pay higher rents, and ending the concept of building new social rent with Government subsidy. But they are emboldened and creeping closer to an outright attack on the fundamentals of social housing. The bedroom tax was one skirmish. Selling property available to re-let in valuable areas would be another. In Hammersmith and Fulham they have already moved on to selling fully-occupied estates to developers.

Harold Macmillan’s famous criticism of Thatcher for ’selling off the family silver’ is as apt as ever. In November 1985 he told the Tory Reform Group:

The sale of assets is common with individuals and states when they run into financial difficulties. First, all the Georgian silver goes, and then all that nice furniture that used to be in the saloon. Then the Canalettos go.

6 Responses to Selling off the family silver… again

Daily Telegraph Property guid has been rubbing its hands with glee ever since this proposal came out…. “If cheap houses become available in some of Britain’s best areas, it could provide golden opportunities for canny investors. Certainly, it is time to end the snobbery and acknowledge the truth. Many local authority homes are fashionable, built to last and brilliantly located. For every hideous tower of cheaply built flats requiring demolition, there are spacious low-rise mansion blocks. These date from the public sector heyday of the Thirties, now considered retro-chic.” Deep irony all the way through that statement; ‘certainly it’s time to end the snobbery and acknowledge the truth’. The real snobbery lies with the writer and the readers of this article who are thinking that houses which are fashionable, built to last and brilliantly located are not to be lived in and enjoyed by the very people they were built and acquired for, people on lower incomes, but are instead meant for wealthier private owners and landlords who do not see them as homes, a place in which to be part of a community to be enjoyed by all, but as a ‘golden opportunity for canny investors’ who most likely can already well afford to live in the ‘best areas’ where they already live, to be ooh-ed and aah-ed over in The Daily Telegraph property section. http://www.telegraph.co.uk/property/9508685/Ex-council-homes-how-to-buy-a-bargain.html

But why is social housing valued at such a high price, often at a higher price than surrounding private properties in such areas? I suspect a number of factors:

1. Social housing tends to be built with primary consideration for people without access to private transport, within walking distance and with a mind to social and community needs, such as easy access to public transport, schools, parks, shops and other amenities. In most places such properties attract a premium valuation.

2. Room size in much social housing, whether built or acquired as such, tends to be greater than in many privately built or sub-divided dwellings. This is especially true of properties built before the Parker-Morris standard on dwelling space was abolished in the 1980s. Again, this attracts a premium valuation.

3. This might be the nub it; the properties that are most desirable for private buy-to-let landlords are those which offer the best guarantee of a secure and long-term tenant. This especially applies to social housing due to the relatively lower cost of rents and the fact that people want afforable living places to be within easy access of their workplace and local amenities and most importantly, family and friends who’ve been resident for decades and generations before local property prices became unafforable for many less affulent people. The buy-to-let market boomed during the last decade as we all know. Could this be why social housing is valued at a higher price than many surrounding properties in these areas? Do valuers suspect that government had a plan to force councils to sell of this housing eventually, thus pricing it accordingly?

“Buy-to-let landlords profit as rents rise 4.3% Demand among tenants continues to grow and surveyors predict rents will rise a further 3.9% over the next 12 months”

So local authorites selling off properties which are valued as such will simply remove much needed affordable housing from their housing stock. Again, the poor are penalised for being poor, especially if they have the temerity to want to live in a pleasant area, close to all amenities, the very reason why their affordable social housing is available in the first place. We know that all property is overpriced in many parts of the country, especially the most ‘affluent’; many such areas have large, less affluent populations whose families have lived there for decades and generations, areas such as Islington, Caledonian Rd and Portland Rd in London. If one of these people falls on hard times because of austerity, why should they have to move because all affordable properties have been sold on via a cosy tie-up between government, surveyors and private landlords?

A fairer alternative would be for second home owners in affluent areas to lose their council tax discounts as, in the main, ‘affluent’ areas contain most second homes. This is something already proposed by government. The extra revenue gained from removing council tax discounts on second homes in affluent areas could then be redirected to local authorities in more deprived areas to allow for more building in our poorest communities. Eric Pickles’ new council funding formula seems to favour wealthier areas areas anyway. There aren’t many second home owners in cheaper areas such as Bradford. The current government proposal is to use the extra income from abolishing the discount to reduce council tax in those local authority areas with large amounts of second homes ownership. The ‘average’ reduction in council tax in areas with large numbers of second home owners will be ‘around’ £ 20 a year. Presumably this reduction will be greatest in areas where there are a lot of second homes and if the average reduction is set as a percentage of local council tax, more will come off council tax for those paying higher rates, of which there will be more in the areas where there are a large number of second homes. This seems unfair when poorer areas are struggling.

Under the governments new homes ‘bonus’, councils will be rewarded each time a new home is built; the rewards are based on which council tax band the house sits in, with bonuses paid for each of the first six years the property is occupied, meaning homes in higher council tax bands will attract greater rewards. So councils in those areas where second homes are in high demand, and where there will always be a market for the wealthiest to buy a second home, could possibly build more properties that are bought as second homes placed in a higher council tax band meaning they get even more revenue once the council tax discount has gone, which would do little to alleviate housing shortages for locals in such areas, as they are priced out of the types of homes that are being built and bought in their area. And it still doesn’t address the increasing discrepancy in funding between north and south/rich and poor areas. Redistributing the income to poorer areas as suggested would solve that and still leave affordable, social housing available in ‘affluent’ areas.

You’ve hit the nail on the head with point number 1. Social housing is currently in mixed wealth areas because it is in areas where there is good transportation, access to hospitals and education. If they were to move further out to lower value areas there would be less access to these services.

At the very least, we can be happy in the knowledge that this is simply, at this stage, at least, a suggestion from a ‘think tank’, and not a policy that has been enacted in any way. Unlike the pathfinder scheme, which, whilst now thankfully cancelled, is, or was, responsible for the break up of communities and this exact same ‘social cleansing’ suggested here, but markedly worse, as people who had outright bought their houses had also and compulsory purchase orders thrown at them, and requested to kindly leave the land, so that property developers could come in and nice, expensive, ‘luxury’ apartments for those who could afford them.

Just want to ensure that none of us kid ourselves with regards to any major political party ‘doing the right thing’ with regards to social housing, and creating a real divide in neighbourhoods; at least there is still the chance to stop this from becoming government policy, and not just a comment from a think tank with an ideological bias.